Derivatives - Applications and Settlement Process
In-house
This practical 2 day course gives a detailed coverage of the major types of derivatives and how they are valued and traded. Delegates will also have a chance to learn about the process of margining and central clearing of derivatives which is broadly discussed at the moment by the industry and regulatory bodies.
Main topics covered include:
- Constructing futures and forwards contracts
- Options, Warrants and OTC - Contracts and pay off profiles
- the role and function of the clearing house and the relationship between end users, the exchange and clearing members
- Exploring the margining system for futures, options on futures, and equity options and futures
- Valuation and settlements of swaps
- Recent developments in CDS market
- Detailed analysis of market application of derivatives
By the end of the course delegates will:
- Explore the use of derivatives for different purposes and by different market players
- Work out the risk reward characteristics
- Understand the role of the exchange and clearing houses
- Learn about the margining and settlement system
The course is suitable for professionals who have some knowledge of derivatives but would benefit from a broader understanding of these instruments and how they are settled for margining purposes.
Who Should Attend
From Banks, Fund Management, Exchanges and Clearing Houses:
- Derivatives Traders
- Settlement Professionals
- Risk Managers
- Fund Managers
- Product Managers
- Middle Office
- OTC Derivatives Clearing
- Auditors
- Regulators
- Operational Risk Managers
- Software Developers
Teaching Method
This is a very interactive course with many exercises, classroom discussions and case studies.
You will benefit from comprehensive take away course documentation.
In order to help us establish your individual and business concerns, you will be asked to fill pre-course questionnaire.
Because of the practical nature of the course the number of places is limited and will be filled on first come, first accepted basis. We advise to book in advance in order to avoid disappointment.
Derivatives Applications and Settlement - A 2 Day Programme
Introduction
- Definition and history of derivatives
- Who are the main users of derivatives and why?
- Where are derivatives traded? – OTC v exchanges
- What is the role of the clearing house?
- Why are derivatives marked to market?
Futures and Forward Contracts
This section explains in detail how futures and forwards contracts are constructed and looks at the different types of products.
- Defining a futures v a forward contract
key terminology
contract specifications
- Basic pricing theory
cost of carry relationship
basis, and carry return
arbitrage and futures/forward prices
- Main types of futures/forwards
bonds, stir, equity, commodities, currencies
FRA’s and swaps
calculating the tick value
- Basic hedge ratio
adjusting the hedge ratio
- Spread trading strategies
intra and inter contract spreads
- How do you work out profit and loss?
Options, Warrants and OTC - Contracts and pay off profiles
- Defining an option call/put
obligations and rights
- terminology explained
- Types of options
options on futures and the underlying product
OTC v exchange options, warrants and covered warrants, convertibles
- Basic option pricing
time value and intrinsic value
overview of the Greeks
- Users and uses versus futures
profit loss profiles at expiry
- Popular hedging and trading strategies
portfolio protection and enhancement
combining positions
Role of the Clearing House
This section provides an insight into the role and function of the clearing house and the relationship between end users, the exchange and clearing members.
- Day in the life of a trade
- Operations of the CH
- Clearing and non clearing members
- Treasury operations and risk management
- Guarantees and netting
- Types of accounts
The Margining System
The following section explains in detail how the margining system works using futures, options on futures, and equity options and futures as detailed examples. Plus the role performed by the Clearing house.
- Collateral, delivery and exercise
- Variation margin on futures
- Variation margin on options based on futures
- Equity net liquidation value
- Portfolio based systems for initial margin - SPAN
- Inter month charge, credits
SWAPS
- Valuation and Settlement
- Defining a swap
- terminology explained
- Interest rate swaps,
fixed v floating
- Uses and applications of swaps
managing interest rate exposure
arbitrage using swaps
- How do you price a swap?
creating a zero spot curve
using STIR futures
- Pricing an asset swap
relationship between repos and swaps
- Currency swaps and equity swaps uses and applications
- Credit Default Swaps and Total Return Swaps
use of CDS in structured credit products
CDOs – CMO, CBO, CLO
- Recent developments in CDS market
Application of Derivatives
This section explains in more detail the major applications of derivatives from a multitude of different types of users
- Who use derivatives?
Corporations, funds, banks, market makers, dealers
- How are derivatives used in fund management?
Asset allocation, basic portfolio protection and enhancement
hedge fund uses of derivatives
- Derivatives in treasury operations
managing interest rate and currency risk
- Using derivatives to trade spreads
intra and inter contract spreads
- How are derivatives used in structured products?
- Option trading strategies
common spreads
Paul North
Paul has over 20 years experience of working and teaching in the financial and derivatives industry. Paul joined the London International Financial Futures and Options Exchange (LIFFE) in 1988, spending several years on the exchange trading floor before transferring to LIFFE’s Business Development Department.
During his time at LIFFE, Paul worked in the fields of broker relations, product research and development, marketing, market automation and education. Paul was Head of Education at LIFFE, before leaving in Dec 1998 to pursue a freelance career in financial education and consultancy.
Paul is also a qualified teacher and has extensive speaking experience both in the UK and abroad, covering all the major aspects of financial markets. Paul has taught delegates from virtually all of the worlds leading investment banks, funds and trading houses. His list of clients includes JP Morgan, Goldman Saches, Credit Suisse, Societe Generale, Deutsche Bank, Merrill Lynch, Morgan Stanley, Barclays Capital among others.
IN-HOUSE TRAINING
If you have a team of 4 or more this course can be customised and organised in-house at your convenience in any of your offices worldwide. Contact one of our advisors to find out more.
Call us now on +44 (0) 207 993 8597 or
